Price of fertilizer

The price of fertilizer moves closely with the price of natural gas due to the latter commodity's use in producing ammonia, a compound made of nitrogen and hydrogen. Natural gas is a key input into ammonia production, so when natural gas prices are high, ammonia prices are forced up. This price hike is then reflected across all other nitrogen-based products. Nitrogen is the most significant single element used in fertilizer, whether through nitrogen solutions, urea or ammonium-based fertilizers, so the result is a jump in fertilizer prices. Accordingly, when natural gas prices drop, this process reverses and fertilizer prices fall.

Moreover, the drop in oil and fuel prices hit fertilizer prices particularly hard. High fuel costs encourage the development of alternative fuels, particularly biofuels made from corn and soy. However, as fuel costs decrease, so does demand for biofuels, reducing crop production. The fertilizer industry is especially susceptible to oil swings and has fallen significantly over the past five years.

In 2011 and 2012, the price of fertilizer hit period highs as natural gas and other energy commodity prices spiked. Yet, increasing production of natural gas due to expanded shale gas extraction in the United States has created more elevated supplies of the commodity, pushing down the price of fertilizer between 2016 and 2017. In 2020, the price of fertilizer dropped 4.6% amid the COVID-19 pandemic and a drop in oil prices. However, in 2021, the price of fertilizer increased amid global economic recovery, exhibiting a 30.2% surge because of global supply chain disruptions that have resulted in higher input costs. Additionally, as crop prices have risen due to a rapid increase in consumer demand, farmers have increased fertilizer purchases to maximize crop potential. This trend is anticipated to continue at the end of the period as farmers continue to struggle with supply chain disruptions.

Fertilizer prices in 2022, in turn, have spiked at a more significant rate following the continuation and worsening of these surges, resulting in more significant hikes in prices for many goods and commodities. In turn, producers faced higher input prices for many types of goods used in their end processes while operating at a higher rate in response to a more reopened economy at the time, which kept fertilizer prices up. The increasingly deteriorating situation in Ukraine following the Russian invasion of the country early in the year resulted in tariffs and various sanctions imposed on Russia following this event, which also kept prices for different exported items from Russia up in the period, which pressured domestic producers to rely on other sources to fuel their production cycles in the time which raised the risk of having to endure more costs from unready sources of production that have to produce at a higher rate, which also kept prices up in the period for fertilizer production and because of this, fertilizer prices. With the continuation of inflationary pressures in 2023 and 2024, fertilizer prices are set to drop significantly but with prices remaining higher than pre-pandemic levels. In 2025, the price of fertilizer is expected to shift back to growth, rising at an estimated 3.3% during the year.